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Asian stocks seen extending gains

(China Daily/Agencies)
Updated: 2009-12-03 08:06

Asian stocks may extend a rally next year after almost doubling since March as earnings improve, UBS AG said, adding to bullish forecasts on the region's equities by four brokerages this week.

The MSCI Asia excluding Japan Index may climb to 600 by the end of the year, UBS strategist Niall MacLeod said in a note yesterday. That's a 27-percent gain from Tuesday's close. Hong Kong and the Chinese mainland are the brokerage's top picks among the region's markets.

UBS joins BNP Paribas, Goldman Sachs Group Inc, Credit Suisse Group AG and Citigroup Inc in predicting gains of at least 9 percent for Asian equities in 2010 as the economic recovery gains pace. The MSCI Asian index has jumped 63 percent this year through Tuesday, set for its best rally since 1993.

"We remain positive on 2010," MacLeod wrote. "Although no longer at 'bargain' levels, valuations do not look stretched. We still see further upside to 2010 earnings."

The Hang Seng China Enterprises Index, tracking H shares traded in Hong Kong, may rise to 15,500 by mid-2010, while the MSCI China Index may climb to 75, UBS strategist John Tang said. The measures closed yesterday at 13,341 and 65.58, respectively.

In India, the Bombay Stock Exchange's Sensitive Index may climb to 20,000 by March 2011, as economic expansion and earnings growth help to draw foreign funds, strategist Suresh A Mahadevan said.

Still, increasing concern about monetary policy may be a "major hurdle" for the region, MacLeod added. "Loose monetary policy and capital flows are likely to keep driving up Asian asset prices," MacLeod wrote. "Asian central bankers are fully aware of the threat of asset 'bubbles'. How they respond to liquidity remains a key issue for Asian equity markets."